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They’re Missing the Point

The editorialists of Spiegel International Online are complaining about the evils of international tax havens. They say, for instance,

no one knows how much money is on deposit in anonymous bank accounts in countries that are euphemistically referred to as tax havens. Estimates by the non-governmental organization Tax Justice Network put the figure at about €16 to €25 trillion ($21 to $33 trillion). In this manner, the native countries of these individuals and companies are deprived of hundreds of millions in taxes, sometimes legally but often illegally.

And

The debt-ridden countries of the Western world can no longer afford to be deprived of such massive revenues. In addition, the public is sharply critical of the fact that some wealthy people can escape their responsibility for their countries through tax flight….

They misunderstand the underlying problem, though. Those countries don’t actually need the tax revenue that’s heading overseas—their governments are spending far too much of their people’s money, and spending it on things that rightfully belong to those people to spend on, or not, according to their own imperatives. The governments are deprived of nothing. The governments should think, instead, of the benefits of those trillions staying at home, in the countries’ private—nongovernmental—economies, because without the present usurious and special interest oriented tax plans, no one would have need to hide his money from the tax man.

As for the public’s disgruntlement over the wealthy being able to hide their money when they cannot, they should be upset. With properly low taxes, though, there is, again, no need to hide.

The editorialists do raise a legitimate beef, though.

Drugs and other criminal funds are hidden and laundered there [in the tax havens], shady deals are arranged, and hedge funds whose speculative activities could shake the financial system once again use them as a base.

You bet. All together, now: if the domestic tax policies were more intelligent and honest—that is to say, set to low rates—the tax havens would be hard put to stay in business—and there would be fewer resources for hiding and laundering criminal funds and fewer bases for Evil Hedge Funds.